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Interim payment dates - have you got enough?

A design and build contract for a hotel and serviced apartments contained a schedule of 23 agreed interim valuation and payment dates, up to contract completion. However, the works overran and the contractor issued another interim application (Interim Application 24) for £23,166,425. The developer said that the contractor had no contractual right to issue or be paid in respect of Interim Application 24. But did the default provisions of the Construction Act save the application?

The Construction Act gives an entitlement to instalment or stage payments, if the work is going to last 45 days or more, but Section 109(2) states that the parties are free to agree the amounts of the payments and the intervals at which, or circumstances in which, they become due. According to the court,(1) this means that the parties can agree stage payments by reference to stages concluded at highly irregular intervals and of highly variable amounts. They could agree any amount and any interval or even that the amount of a payment should be nil. Just because the agreement did not provide for interim payments covering all of the contract work, this was no reason to import the Construction Act's default provisions so as to generate interim payments in respect of the work not covered by the agreement. The parties had agreed on the 23 stage payments and no more – and thus the amounts and intervals of the stage payments – so there was no room for the Construction Act to apply. The contractor therefore had no contractual right to make or be paid in respect of Interim Application 24 (or any subsequent interim application).

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